By Tiernan Ray

Following Apple's (AAPL) “Town Hall” event in Cupertino, where it unveiled the iPhone “5C,” a lower-cost, lacquered polycarbonate model, and the “5S,” it's new top-of-the-line model in three metal finishes, I got some hands-on time in the demo area at 4 Infinite Loop.

The offerings had to some extent been widely revealed by rumor sites, but the ultimate implications are not fully understood, and the devices themselves are more attractive up close than is apparent in the formal presentation, as is often the case with Apple events.

Rich Dougherty, the head of technology consultancy Envisioneering, was on hand. He opined that the support for 64-bit processing on the iPhone 5S, coupled with fingerprint recognition, is a very big deal.

“This will give them support for more advanced security features such as quadruple-DES” encryption, opined Dougherty. “That will help them quite a bit with applications for enterprise, healthcare, government.”

“The Kaiser-Permante's and a lot of three-letter agencies will be using this,” he added. “There's nothing like this out there,” he said, arguing the iPhone 5S promises security beating what BlackBerry has traditionally offered, and well beyond the “KNOX” security platform Samsung Electronics offers.

Another interesting aspect of 5S is the standalone chip for tracking sensor data event when the phone is not actively in use. The “motion processor,” called “M7,” which is separate from the A7 microprocessor, will give Apple tons of data from users about how they want to use non-traditional devices such as fitness monitors. “In two weeks, they will start to get feedback from millions of consumers about what they want these things to be,” Dougherty told me.

By “things,” he meant future post-phone devices such as a smart watch, which Apple will offer next year, Dougherty thinks. He believes Apple has a chance to best Samsung, which unveiled last week the “Galaxy Gear” smartwatch. Dougherty tried out the Gear at Samsung's event in Berlin, and believes it is clumsy.

He also estimates the cost to make Gear is only $50, so that over time, it will fall in price to where Samsung is giving away the Gear for free as an incentive to move units of the Galaxy Note 3 phablet.

“Look, Apple have been looking at this for longer than anyone else,” regarding smart watches, he says. “I can remember going to presentations about smart watches over at 3 Infinite Loop over a decade ago.”

The gold model of the iPhone 5S, one observer standing next to me quipped, is “not Lexus keychain gold,” but rather a subtler shade, pretty much the champaign gold that had been rumored. I liked most the “space gray” finish that replaces the traditional black finish. There's also a silver model. The size and weight and shape is otherwise identical to the iPhone 5.

I went through the process of registering my fingerprint with an iPhone 5S. It was relatively simple. A section in the Settings app instructs you to move your finger around the iPhone's home button. As you paw the button for about ten seconds at different angles, the screen gradually fills out a picture of your fingerprint. Up to five prints can be recorded, including multiple fingerprints of you, or prints of other people you allow to register. Once registered, you can quickly unlock the 5S by gently pressing the home button.

Dougherty expressed enthusiasm for the technology, and also mused that it will be hacked in short order, perhaps by researchers testing a wax cast of a print. Whether such a hack will affect the usefulness depends on how practical such a hack is in the real world. “Will they be able to sneak an impression of your finger while you're at the bar using silly putty?” he wondered.

The iPhone 5C is indeed very sturdy, as Apple promises. It feels solid to the touch, and the lacquered finish is attractive. This doesn't feel like a cheapie phone.

One disappointing element for the Street is the price. Gene Munster of Piper Jaffray, who was on hand and spoke with me, said the wholesale price of $550 for the 16-gig model is the same as the 4S was, and well above what he had been modeling. He was expecting to see an 8-gig model for $350 wholesale. The result, he tells me, is “Their units will be lower than I'd thought, but their margins will be higher.”

Why isn't Apple being more aggressive on price? It's possible that with another event in Beijing tonight, at which Munster and others think Apple will announce a partnership with China Mobile, Apple didn't want to slash prices before it scores the world's biggest carrier and effectively give the store away.

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There are 20 comments

SEPTEMBER 10, 2013 4:23 P.M.

Fuzzy wrote:

Go to Apples China site and check out the prices!

5C, starting from US$ 733
5S, from US$ 864

SEPTEMBER 10, 2013 4:31 P.M.

Ed wrote:

A complete waste and another reason to Fire Cook. This guy is a MORON.

SEPTEMBER 10, 2013 4:46 P.M.

Anonymous wrote:

These babies just ate Blackberry's enterprise market. We read yesterday about Blackberry's consumer sales falling off the map.

I just heard Jeffries analyst Peter Misek on the CBC.

@ Ed. Are you Peter Misek? Misek commented on the CBC re Apple's high prices and the obstacle that small incomes pose on the developing markets. Well. Nay. Nay. Sir. All Apple has to do is eat Blackberry's global consumer and enterprise market. Goodbye 60 million subs.

And what were you saying about Blackberry and MDM? Ha. Can't touch this security mate. iOS7 Rules.

SEPTEMBER 10, 2013 4:53 P.M.

Anonymous wrote:

Looks like the guys at Google who work on Android were caught by Apple standing around scratching their bums. Then there's Sergei bored with Glass hence turning to diddle himself with the hired help. Are we supposed to be impressed with Samsung's Gear? Maybe Samsung should have called their watch the Samsung Fear? Left behind dudes. Left behind. Like we need trinkets.

SEPTEMBER 10, 2013 5:59 P.M.

Dave wrote:

Amazing strategy. Get rid of iPhone 5. Manufacture 5C, which has the same features, but cost a fraction of the price to make- then sell that one for $100 cheaper than the new expensive 5s.
You have to hand it to Apple, they love their high margin-low volume model, and will not budge.
I can't see how they can sell 5c in high volume for that price. If you can afford $550 or $99, $100 more will not break most people's bank.

SEPTEMBER 10, 2013 6:13 P.M.

Market Mayhem wrote:

Apple stock tanks yet again. Isn't there anything Apple can do at all to stop the company's share price collapse? With nearly $150 billion in cash in the bank, why can't Apple figure out how to build a product that will impress investors. Every product Apple comes out with now is immediately considered a future fail by Wall Street and the tech industry. It's like Apple just stopped trying to create knock-your-socks-off products. History continues to repeat itself. Every time Tim Cook opens his mouth, Apple's share price tanks. Maybe he shouldn't bother to show up for future events. Get someone who might bring shareholders good luck.

Wall Street totally believed Peter Misek's remarks about lackluster iPhone sales. They swallowed it hook, line and sinker. He might be an idiot, but Wall Street thinks he's a genius and now Apple's value has gone completely out the window.

SEPTEMBER 10, 2013 6:35 P.M.

Macrimony wrote:

Apple just came out with another product investors deem as a massive failure. How many years is this going to go on? This is why I think Apple shouldn't depend on its hardware business any longer. It's plain to see Apple doesn't know how to create smartphones that are the best in the industry. Samsung clearly knows how to build more impressive smartphones than Apple does. Apple should branch into the search engine business where profits come easy. Tim Cook remains clueless about creating shareholder value within the company. He's damn sure not in Jeff Bezos' or Reed Hastings' class of CEO material. Tim Cook only knows how to make Apple's share price lose value. This will become another losing year for pathetic Apple shareholders while the rest of the stock market soars.

SEPTEMBER 10, 2013 6:53 P.M.

theflew wrote:

@Macrimony

The problem isn't that Apple's devices aren't selling. It's the fact that they are growing at a rate slower than the overall market. It's possible in a few years you'll have Google and Microsoft 1 and 2 and Apple will be the one with 5% of the market just like they have in the PC market. Apple appears to be using Nokia and RIM's playbook in how to to not stay in touch with the market.

SEPTEMBER 10, 2013 8:34 P.M.

@ theflew wrote:

No. I don't think so. Nope. Not at all.

Nokia, Microsoft, RIM, HTC and Blackberry: Not in the same class.

SEPTEMBER 10, 2013 8:43 P.M.

Anonymous wrote:

I just watched a Bloomberg video with Furious Minds' Ashley Schwartz. She's an idiot. Has device making history too. She called Appoe a one trick pony and then lauded Amazon and Goigle as the way to be. Right. Apple comes out with a 64 bit chip which is desktop architecture and no one rose in mobile has that but she calls Apple a one trick pony. Get a grip MS. Obviously Google, Amazon and Samsung are walking around with fruitlessly empty cornocopias because Apple hadn't given them a hint.

64 bit mobile chips are pretty hot stuff in mobile chip design and Apple has just taken the lead. Big lead.

At this point. Re Blackberry. And it's QNX driven BB10. Why. Apple has introduced the M7 chip. Plus the A7. Soc is way better than RTOS boys and girls.

SEPTEMBER 10, 2013 8:43 P.M.

Anonymous wrote:

I like the 5s. 64 bit, plus sensor, much better camera are great and innovative (especially the 64 bit which is pioneering)

The 5s puzzles me though. It's too expensive to gain meaningful market share in developing countries which I thought was the point, no? If not why bother? I can't see anyone plunking down the cash for 5c instead of a bit more for the 5s.

SEPTEMBER 10, 2013 10:07 P.M.

Dr Albert wrote:

@Anonymous

The 5c appears to be aimed at children - not a market to be ignored. Kids want something trendy and attractive, and parents will pay up, happy they are saving a few bucks over the 5s. That and covering for potential supply problems with the more sophisticated 5s.

It's just such a shame all the cool new features on the 5s will be hardly visible on the tiny screen.

SEPTEMBER 10, 2013 10:13 P.M.

Elppa wrote:

5C is 5 in plastic disguise.
5S is 5 with A7.
Cook is cooked.

SEPTEMBER 10, 2013 11:58 P.M.

Anonymous wrote:

64 bit is big stuff and it'll take awhile for others to catch up. As for Apple innovating or not. They are. You just aren't seeing everything they're doing. I think though Apple is holding back a lot so they don't get burned the way they did with the iPhone by Google and Samsung.

SEPTEMBER 11, 2013 12:00 A.M.

Hey Samsung, Google! wrote:

Surprise us ya losers!

You too Amazon!

SEPTEMBER 11, 2013 6:24 A.M.

Anonymous wrote:

Apple is a very impressive company because they are now a leader in chip design. Not only that. They've married their chip to their software. Lemme see you do that. Hmm.

As for Peter Misek. He's not impressed. Dude. What would impress you? Just wait. Unless your idea is just another numb nut idea. Eh. Or are you bummed out because you never get invited to Coop coop Cupertino! Cha Cha Cha!

How's Blackberry doing? They might be able to find a buyer if they start telling the world that their Waterloo headquarters has been discovered to be sitting on one of the world's largest reserves of oil. Take the money and run.

SEPTEMBER 11, 2013 8:25 A.M.

cool and the bang wrote:

64 bit what?
half the people here could not answer this, although they comment on it
wheew

SEPTEMBER 11, 2013 8:30 A.M.

Hooblus wrote:

The comments here are laughable. The people complain about margins, so Apple unveils phones that will increase margins and then they complain about the phones aren't cheap enough and won't sell in volume. LOL. You can't have it both ways. They sell premium products and mint money. Apple has never been about marketshare. Get over it. If investors don't understand the technical implications of the new phones then that's their stupidity. There's a lot more coming from Apple given the technical upgrades in the 5s.

SEPTEMBER 11, 2013 9:34 P.M.

Andrew wrote:

Apple is barking up the wrong tree. 64-bit is useless for now, gamers will not be impressed, no proper controls and tiny screen; and fingerprint scanner is proven as a failure in notebooks. What people want is a larger screen and a diversification of devices across different consumer groups. We will have to wait another one more year for Apple to re-irritate investors. Apple share price has already collapsed by 5.4% to $467.

SEPTEMBER 12, 2013 12:27 A.M.

@ Andrew wrote:

Are you from Samsung? Or what. What are you saying? Apple should have come out with larger screens and the 64 bit chip next year. Right. And poorer margins but cheaper phones? Right. Unfortunately that's not Apple. Guess who?

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.